New credit directive gives more protection to consumers

The new EU Consumer Credit Directive has now come into force giving more protection and power to consumers.

The directive amends the Consumer Credit Act and builds upon existing protections to give extra rights and standardised information to consumers.

The Consumer Minister, Edward Davey, said the directive is also designed to encourage lenders to act more responsibly.

Under the new rules, consumers will have up to 14 days to cancel new loan agreements. They will also have the option to make partial early repayments on loans. Under the old system, they were only able to pay off the full amount early.

Lenders will have to accept more responsibility for borrowers and must give them standardised pre-contractual information to help them compare different loans.

They must also ensure that borrowers understand the details of the loan and they must carry out a thorough check on the borrower’s credit worthiness before any loan is agreed.

Mr Davey said: “The implementation of the Consumer Credit Directive will help strengthen a culture of responsible lending. With new legal rights for consumers and greater responsibility for lenders, consumers will be better able to take charge of their money.

The directive came into force on 1st February 2011.

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